News Points to Depression

Without any doubt this was a risk off week as the economic statistics this week continued to spell DEPRESSION! Rather than spend pages discussing the horrible economic news, I thought I would paste a copy of the links to major economics headlines from this past week. I would encourage you to go to every day where there are links to the most important economics news. As well, you should go here to read about news for all the companies covered in this letter. I post this material in the mornings for your convenience as well as my own.

Regarding links shown on your left, I would like you to note the one with John Williams, which takes you to my interview with John. In that interview he projected startling but not surprising depression numbers for 

unemployment. But this time, given the massive amount of money that is being printed to try to keep the system from collapse, there is a very real possibility that we are facing a hyperinflation.

The point to realize is that prior to hyper­ inflations, for quite a long time the public is not aware that there is a problem. In America, statistics manipulated to make government look better in managing the economy along with a relatively slow inflationary ramp up has lulled investors to sleep. The middle classes have felt a massive decline in their living standards, which can in large part be explained by the red line in John Williams’s chart shown directly above. That red line is the official government’s inflation rate, which stopped using a fixed basket of items that measured the cost of living for an average family of 4 and started to play with the numbers to generate lower CPI numbers. Tricks like removing housing costs, hedonic pricing, and substitution were tricks that, in addition to losing higher-paying jobs to overseas, led to the impoverishment of Middle America thanks to NAFTA and so-called “free trade” in general. The blue line in the chart above left is the actual cost of living that would be reported had the government used the same methods as prior to 1980. What is most interesting in this chart is how the price of gold has, with some extreme volatility along the way, kept up with the actual cost of living that John reports faithfully in his Shadowstats publication ( John is a strident believer that we are now facing the dollar’s demise and a hyperinflation. Alasdair Macleod agrees and thinks the fiat system won’t last beyond the end of this year. Regarding the chart above right, it shows how volatile gold was during the German hyperinflation. But again, gold held its purchasing power. Keep that in mind as we head into an extremely tumultuous season ahead.   

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